Final Results

RNS Number : 2602Q

International Cons Airlines Group

26 February 2016

FULL YEAR RESULTS ANNOUNCEMENT

International Consolidated Airlines Group (IAG) today (February 26, 2016) presented Group consolidated results for the year to December 31, 2015.

IAG period highlights on results:

· Fourth quarter operating profit €540 million excluding Aer Lingus and before exceptional items (2014: operating profit of €260 million), including Aer Lingus €530 million

· Passenger unit revenue for the quarter up 3.1 per cent. Excluding Aer Lingus and at constant currency down 3.7 per cent including approximately 1 point adverse impact from Paris attacks

· Non-fuel unit costs before exceptional items for the quarter up 2.4 per cent. Excluding Aer Lingus and at constant currency down 3.9 per cent

· Fuel unit costs before exceptional items for the quarter down 13.4 per cent, down 23.9 per cent at constant currency

· Operating profit for the year to December 31, 2015 of €2,300 million excluding Aer Lingus and before exceptional items (2014: operating profit of €1,390 million), up 65 per cent, including Aer Lingus €2,335 million

· Revenue for the year up 13.3 per cent to €22,858 million and passenger unit revenue for the year down 3.5 per cent at constant currency

· Fuel unit costs for the year before exceptional items down 6.3 per cent, down 17.2 per cent at constant currency

· Non-fuel unit costs for the year before exceptional items up 4.3 per cent, down 3.9 per cent at constant currency

· Cash of €5,856 million at December 31, 2015 was up €912 million on 2014 year end, including €772 million from Aer Lingus

· Adjusted gearing up 3 points to 54 per cent and adjusted net debt to EBITDAR remained constant at 1.9 times including Aer Lingus

Performance summary:


	Year to December 31
Financial data € million	2015	2014	Higher / (lower)
Financial data € million	2015	2014	Higher / (lower)
Passenger revenue	20,350	17,825	14.2 %
Total revenue	22,858	20,170	13.3 %
Operating profit before exceptional items	2,335	1,390	68.0 %
Exceptional items	(17)	(361)	(95.3)%
Operating profit after exceptional items	2,318	1,029	125.3 %
Profit after tax	1,516	1,003	51.1 %
Basic earnings per share (€ cents)	73.5	48.2	25.3 pts
Operating figures	2015	2014	Higher / (lower)
Operating figures	2015	2014	Higher / (lower)
Available seat kilometres (ASK million)	272,702	251,931	8.2 %
Seat factor (per cent)	81.4	80.4	1pt
Passenger unit revenue per ASK (€ cents)	7.46	7.08	5.4 %
Non-fuel unit costs per ASK (€ cents)	5.30	5.08	4.3 %
€ million	December 31,	December 31,	Higher / (lower)
€ million	2015	2014	Higher / (lower)
Cash and interest-bearing deposits	5,856	4,944	18.4 %
Adjusted net debt⁽¹⁾	8,510	6,081	39.9 %
Adjusted net debt to EBITDAR	1.9	1.9	0pts
Adjusted gearing⁽²⁾	54%	51%	3pts

⁽¹⁾Adjusted net debt is net debt plus capitalised rolling four quarter aircraft operating lease costs.
⁽²⁾Adjusted gearing is adjusted net debt, divided by adjusted net debt and adjusted equity.

Willie Walsh, IAG Chief Executive Officer, said:

"We're reporting very strong full year results with an operating profit before exceptional items of €2,335 million including Aer Lingus. At constant currency, passenger unit revenue was down 3.5 per cent with non-fuel unit costs down 3.9 per cent and fuel unit costs down 17.2 per cent.

"Aer Lingus has made a positive contribution of €35 million operating profit since it joined the Group on 18 August last year.

"These results are in line with our recent target and have exceeded our original 2015 operating profit target of €1.5 billion that we set in 2011. It's undoubtedly been a good year but it's also been challenging with extreme volatility in the currency and fuel markets. The benefits gained from lower fuel prices have been partially offset by the stronger US dollar.

"In the quarter, we made an operating profit before exceptional items of €530 million including Aer Lingus.

"We're pleased to confirm that the Board is proposing a final dividend to shareholders of 10 euro cents per share, which brings the full year dividend to 20 euro cents, subject to shareholder approval at our AGM in June."

Trading outlook

In 2016, IAG expects to generate an absolute operating profit increase similar to 2015. Revenue trends in quarter 1 appear broadly in line with those experienced in quarter 4 2015.

Forward-looking statements:

Certain statements included in this report are forward-looking and involve risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such forward-looking statements.

Forward-looking statements can typically be identified by the use of forward-looking terminology, such as "expects", "may", "will", "could", "should", "intends", "plans", "predicts", "envisages" or "anticipates" and include, without limitation, any projections relating to results of operations and financial conditions of International Consolidated Airlines Group S.A. and its subsidiary undertakings from time to time (the 'Group'), as well as plans and objectives for future operations, expected future revenues, financing plans, expected expenditures and divestments relating to the Group and discussions of the Group's Business plan. All forward-looking statements in this report are based upon information known to the Group on the date of this report. The Group undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

It is not reasonably possible to itemise all of the many factors and specific events that could cause the forward-looking statements in this report to be incorrect or that could otherwise have a material adverse effect on the future operations or results of an airline operating in the global economy. Further information on the primary risks of the business and the risk management process of the Group is given in the Annual Report and Accounts 2014; these documents are available on www.iagshares.com.

IAG Investor Relations

2 World Business Centre Heathrow

Newall Road, London Heathrow Airport

HOUNSLOW TW6 2SF

Tel: +44 (0)208 564 2900

Investor.relations@iairgroup.com

CONSOLIDATED INCOME STATEMENT

	Year to December 31
€ million	Before exceptional items	Exceptional items	Total 2015	Before exceptional items	Exceptional items	Total 2014	Higher/ (lower)
€ million	2015	Exceptional items	Total 2015	2014	Exceptional items	Total 2014	Higher/ (lower)

Passenger revenue	20,350		20,350	17,825		17,825	14.2 %
Cargo revenue	1,024		1,024	992		992	3.2 %
Other revenue	1,484		1,484	1,353		1,353	9.7 %
Total revenue	22,858		22,858	20,170		20,170	13.3 %

Employee costs	4,905		4,905	4,325	260	4,585	13.4 %
Fuel, oil costs and emissions charges	6,082	(51)	6,031	5,987		5,987	1.6 %
Handling, catering and other operating costs	2,371		2,371	2,063		2,063	14.9 %
Landing fees and en-route charges	1,882		1,882	1,555		1,555	21.0 %
Engineering and other aircraft costs	1,395		1,395	1,276		1,276	9.3 %
Property, IT and other costs	965	68	1,033	927		927	4.1 %
Selling costs	912		912	859		859	6.2 %
Depreciation, amortisation and impairment	1,307		1,307	1,196	(79)	1,117	9.3 %
Aircraft operating lease costs	659		659	551		551	19.6 %
Currency differences	45		45	41	180	221	9.8 %
Total expenditure on operations	20,523	17	20,540	18,780	361	19,141	9.3 %
Operating profit	2,335	(17)	2,318	1,390	(361)	1,029	68.0 %
Net non-operating costs	(517)		(517)	(284)	83	(201)	82.0 %
Profit before tax	1,818	(17)	1,801	1,106	(278)	828	64.4 %
Tax	(279)	(6)	(285)	(238)	413	175	17.2 %
Profit after tax for the year	1,539	(23)	1,516	868	135	1,003	77.3 %

Operating figures	2015 ⁽¹⁾			2014 ⁽¹⁾			Higher/ (lower)
Available seat kilometres (ASK million)	272,702			251,931			8.2 %
Revenue passenger kilometres (RPK million)	221,996			202,562			9.6 %
Seat factor (per cent)	81.4			80.4			1pt
Cargo tonne kilometres (CTK million)	5,293			5,453			(2.9)%
Passenger numbers (thousands)	88,333			77,334			14.2 %
Tonnes of cargo carried (thousands)	874			897			(2.6)%
Sectors	660,438			599,624			10.1 %
Block hours (hours)	1,867,905			1,712,506			9.1 %
Average manpower equivalent	60,862			59,484			2.4 %
Aircraft in service	529			459			15.3 %
Passenger revenue per RPK (€ cents)	9.17			8.80			4.2 %
Passenger unit revenue per ASK (€ cents)	7.46			7.08			5.4 %
Cargo revenue per CTK (€ cents)	19.35			18.19			6.4 %
Fuel cost per ASK (€ cents)	2.23			2.38			(6.3)%
Non-fuel unit costs per ASK (€ cents)	5.30			5.08			4.3 %
Total cost per ASK (€ cents)	7.53			7.45			1.1 %

⁽¹⁾Financial ratios are before exceptional items.

CONSOLIDATED INCOME STATEMENT
	Three months to December 31
€ million	Before exceptional items	Exceptional items	Total 2015	Before exceptional items	Exceptional items	Total 2014	Higher/ (lower)
€ million	2015	Exceptional items	Total 2015	2014	Exceptional items	Total 2014	Higher/ (lower)

Passenger revenue	5,090		5,090	4,390		4,390	15.9 %
Cargo revenue	281		281	268		268	4.9 %
Other revenue	368		368	357		357	3.1 %
Total revenue	5,739		5,739	5,015		5,015	14.4 %

Employee costs	1,306		1,306	1,143	260	1,403	14.3 %
Fuel, oil costs and emissions charges	1,429	(27)	1,402	1,470		1,470	(2.8)%
Handling, catering and other operating costs	656		656	521		521	25.9 %
Landing fees and en-route charges	495		495	370		370	33.8 %
Engineering and other aircraft costs	306		306	338		338	(9.5)%
Property, IT and other costs	254	6	260	229		229	10.9 %
Selling costs	216		216	189		189	14.3 %
Depreciation, amortisation and impairment	370		370	326	(79)	247	13.5 %
Aircraft operating lease costs	178		178	146		146	21.9 %
Currency differences	(1)		(1)	23	98	121	(104.3)%
Total expenditure on operations	5,209	(21)	5,188	4,755	279	5,034	9.5 %
Operating profit	530	21	551	260	(279)	(19)	103.8 %
Net non-operating costs	(268)		(268)	(106)	53	(53)	152.8 %
Profit before tax	262	21	283	154	(226)	(72)	70.1 %
Tax	62	(9)	53	(16)	397	381	(487.5)%
Profit after tax for the period	324	12	336	138	171	309	134.8 %


Operating figures	2015 ⁽¹⁾			2014 ⁽¹⁾			Higher/ (lower)
Available seat kilometres (ASK million)	69,321			61,697			12.4 %
Revenue passenger kilometres (RPK million)	55,849			49,025			13.9 %
Seat factor (per cent)	80.6			79.5			1.1pts
Cargo tonne kilometres (CTK million)	1,417			1,430			(0.9)%
Passenger numbers (thousands)	22,131			18,427			20.1 %
Tonnes of cargo carried (thousands)	236			236			0.0 %
Sectors	166,701			143,987			15.8 %
Block hours (hours)	472,624			413,669			14.3 %
Average manpower equivalent	63,496			58,814			8.0 %
Passenger revenue per RPK (€ cents)	9.11			8.95			1.8 %
Passenger unit revenue per ASK (€ cents)	7.34			7.12			3.1 %
Cargo revenue per CTK (€ cents)	19.83			18.74			5.8 %
Fuel cost per ASK (€ cents)	2.06			2.38			(13.4)%
Non-fuel unit costs per ASK (€ cents)	5.45			5.32			2.4 %
Total cost per ASK (€ cents)	7.51			7.71			(2.6)%

⁽¹⁾Financial ratios are before exceptional items.

Financial review:

IATA market growths

The air traffic industry performed well benefiting from lower fuel unit costs and reasonable demand growth, despite some softening in the global economic environment. Overall, North America and Europe were the strongest markets, while Africa was impacted by lower fuel prices and Latin America was impacted by weaker currencies in areas such as Brazil and Argentina.

The market growth trend for the industry in 2015 was strong, with a passenger load factor improvement of 0.5 points on a capacity increase of 5.9 per cent. Volumes increased on additional capacity in all regions with passenger load factor improvements except the Middle East which saw a significant increase in market capacity.

Year to December 31, 2015	Capacity ASKs	Passenger load factor	Higher/ (lower)
Europe	3.8%	82.6	1.0 pts
North America	3.1%	81.8	0.1 pts
Latin America	9.2%	80.1	0.1 pts
Africa	1.5%	68.5	1.0 pts
Middle East	13.2%	76.4	(1.7) pts
Asia Pacific	6.4%	78.2	1.3 pts
Total market	5.9%	79.7	0.5 pts
Source: IATA Air Passenger Market analysis

IAG capacity

In 2015, IAG increased capacity, measured in available seat kilometres (ASKs) by 8.2 per cent or 5.0 per cent excluding Aer Lingus. With the exception of Africa, Middle East and South Asia, IAG capacity was increased across all regions, reflecting:

· Acquisition of Aer Lingus on August 18;

· Continued expansion at Vueling;

· Restoration of routes as part of Iberia's Plan de Futuro; and

· New destinations, shorthaul seat densification and larger aircraft at British Airways.

IAG Passenger load factor was 81.4 per cent which was higher than the IATA average of 79.7 per cent and one point higher than last year.

Year to December 31, 2015	ASKs higher/(lower)	Passenger load factor	Higher/ (lower)
Domestic	7.7%	78.2	0.9 pts
Europe	20.5%	79.1	1.0 pts
North America	5.3%	84.0	0.9 pts
Latin America and Caribbean	7.6%	83.1	1.7 pts
Africa, Middle East and South Asia	(3.0%)	78.6	0.7 pts
Asia Pacific	9.0%	83.2	1.1 pts
Total network	8.2%	81.4	1.0 pts

Market segments

While the Domestic and European markets were very competitive our passenger load factors improved in both regions, but remain still lower than the European average reported by IATA, influenced by the higher dependency of our shorthaul fleet on connectivity and stronger seasonality of our networks.

North America continues to represent the largest part of the IAG network and with the highest passenger load factor. Excluding Aer Lingus, capacity was flat year over year, with a slight decrease at British Airways impacted by the introduction of new fleet such as the Boeing 787 and Airbus A380, offsetting an increase at Iberia from additional capacity to Miami, New York and Los Angeles. IAG passenger load factor for North America improved 0.9 points, ahead of the year over year increase reported by IATA.

Latin America and Caribbean capacity increase reflects additional frequencies to Mexico by both British Airways and Iberia. Iberia has three additional destinations: Cali, Medellin and Havana. Passenger load factor in this region increased and was three points ahead of the industry average.

Africa, Middle East and South Asia decrease is driven by reductions in North and West Africa due to weaker demand resulting from falling fuel prices, political unrest and Ebola. Flying was ceased to Entebbe by British Airways, and reduced in Senegal and Gambia by Vueling. Additional capacity was deployed to South Africa and new services launched to Ghana and Cape Verde. Passenger load factor improved 0.7 points.

In Asia Pacific, the capacity increase is driven by the full year impact of up gauging last year to Hong Kong with the Airbus A380, Hyderabad and Chennai. In 2015, a direct flight to Kuala Lumpur was added and the Singapore and Haneda routes were expanded. Passenger load factors increased to 83.2, the second highest region on the IAG network.

Acquisitions

The 2015 performance includes Aer Lingus from August 18, 2015. Since the acquisition date, Aer Lingus contributed 3.2 points of the Group's 8.2 point capacity increase, €622 million (3 per cent) in revenues and €35 million (1.5 per cent) before exceptional items in operating profit. The following review includes these results, the comparative period excludes Aer Lingus.

Revenue

Passenger revenue

Passenger revenue for the Group rose 14.2 per cent for the year on a capacity increase of 8.2 per cent, benefiting from the stronger pound sterling and US dollar.

At constant currency ('ccy') and excluding Aer Lingus, passenger unit revenue decreased 3.7 per cent. This decrease in passenger unit revenues was from lower yields (passenger revenue/revenue passenger kilometre) partially offset by a 1.0 point improvement in load factors.

The passenger unit revenue reduction follows a pattern of industry growth in a falling fuel cost environment, allowing the airlines to increase margins despite lowering fares.

At ccy, passenger yields were down at British Airways and Iberia with pressure on fares from lower fuel prices particularly on oil related routes. Lower yields were also noted from economic uncertainty and weakening of currencies throughout Latin America, Africa and the Middle East. At the same time revenue performance still remained strongest in our main key market, North Atlantic. At Vueling yield pressure was less prominent, down 1.5 per cent, reflecting its relative strength in its domestic market. Aer Lingus yield improved since acquisition with a strong performance across the North Atlantic. Together, the Group carried 88 million passengers, an increase of 11 million from 2014, with passenger load factor improvement across all four carriers.

Cargo revenue

The airfreight industry experienced another challenging year with capacity exceeding demand. IAG Cargo continued its focus on strategic partnerships, with an increase in its capacity share agreement with Qatar Airways and a new agreement with Finnair cargo. Cargo volume measured in tonne kilometres (CTK) decreased 2.9 per cent with a reduction in yield of 3.9 per cent at ccy. Despite a decrease in CTKs, IAG Cargo grew its volumes in Constant Climate and Prioritise premium products improving its net contribution to the Group.

Other revenue

Other revenue includes the BA Holidays programme, third party maintenance and third party handling. Excluding currency, other revenue improved 2.5 per cent, primarily from an increase in activity at BA Holidays partially offset by a decrease in third party activity.

Revenue		Higher/(lower)
€ million	2015	Year over year	Per ASK at ccy
Passenger revenue	20,350	14.2%	(3.5%)
Cargo revenue	1,024	3.2%
Other revenue	1,484	9.7%
Total revenue	22,858	13.3%	(4.1%)

Expenditure before exceptional items

Employee costs

Following sterling and dollar strength, employee costs rose 13.4 per cent. At ccy, and on a unit basis employee costs are down 3.5 per cent. The Group employed an average of 60,862 people (measured in average manpower equivalent 'MPE'), an increase of 2.3 per cent versus last year. Excluding Aer Lingus, average MPEs are down 0.6 per cent on 5 per cent ASK growth. Increases were primarily from Vueling growth offset by headcount reductions flowing through from Iberia's Mediation Agreement. Employee unit costs improved at Iberia from the reduction in employees in addition to growth. British Airways employee unit costs increase slightly from salary awards and pension costs. Vueling also sees higher unit costs with the crew collective agreement and the impacts associated with opening international bases, increasing allowances and overnight costs. Productivity increased 5.8 per cent for the Group, with improvements at each airline.

Employee costs

Higher/(lower)

€ million

2015

Year over year

Per ASK at ccy

Employee costs

4,905

13.4%

3.5%

Productivity		Higher/(lower)
€ million	2015	Year over year
Productivity	4,481	5.8%
Average manpower equivalent	60,862	2.3%

Fuel, oil and emissions costs

Total fuel costs for the year increased by 1.6 per cent. At ccy, and on a unit basis fuel costs are down 17.2 per cent from lower fuel prices net of hedging, and from improved unit consumption. The foreign exchange impact on fuel costs, net of hedging was adverse c. 12 percentage points for the Group, against the pound sterling and the euro. Fuel unit costs were reduced 6.3 per cent in euro terms. Consumption improved c. 2 percentage points with new generation aircraft and improved operational procedures.

Fuel costs

Higher/(lower)

€ million

2015

Year over year

Per ASK at ccy

Fuel, oil and emissions costs

6,082

1.6%

17.2%

Supplier costs

Total supplier costs for the year rose by 12.6 per cent. At ccy and on a unit basis, supplier costs were reduced by 4.5 per cent. The supplier unit cost improvement reflects the strong airline cost performance and continued benefits from the Group initiatives, including GBS procurement, synergies and maintenance.

Supplier costs		Higher/(lower)
€ million	2015	Year over year	Per ASK at ccy
Supplier costs:			4.5%
Handling, catering and other operating costs	2,371	14.9%
Landing fees and en-route charges	1,882	21.0%
Engineering and other aircraft costs	1,395	9.3%
Property, IT and other costs	965	4.1%
Selling costs	912	6.2%
Currency differences	45

By supplier cost category

Handling, catering and other operating costs rose 5.6 per cent at ccy reflecting additional BA Holiday activity (c. 3 points), higher number of passengers carried and inflationary price increases. These factors were partially offset by an improvement in operations year over year, which reduced costs related to disruption.

Landing fees and en-route charges were higher by 15.2 per cent at ccy. Excluding Aer Lingus¹, the increase was 7.3 per cent, due to additional flying hours, with sectors flown up and a marginal average inflationary price rise.

Engineering and other aircraft costs were down 3.7 per cent excluding currency impacts. During the year a €35 million credit was recognised with the renegotiation of engine manufacturer contracts; by contrast, in the prior year, a €28 million provision for the obsolescence of spare parts was recorded (c. 5 point year over year improvement). The underlying movement reflects more aircraft and higher flying hours, partially offset by less third party maintenance.

Property, IT and other costs are down 4.4 per cent excluding currency due to cost improvements including IT initiatives and one-time benefits.

Selling costs decreased 2.3 per cent excluding currency. Additional costs were incurred related to higher passenger numbers and from initiatives in new markets, offset by lower commissions paid and improvements in supplier contract terms.

¹The impact of Aer Lingus was significant on Landing fees and en-route charges from its shorter stage length, with proportionally higher block hours and sectors than the Group's.

Ownership costs

The Group's ownership costs were up 12.5 per cent, with 9 points of adverse currency. During the year the Group reviewed the useful lives and residual values of its fleet, realigning by aircraft type and to each airline's retirement plan. The principal impact was accelerated depreciation of Iberia's owned Airbus A340-300 fleet, extending the useful lives of British Airways Boeing 777 fleet and adjustments to the Airbus A320 fleet, with a total net credit of €36 million. The underlying rise in ownership costs reflects new replacement aircraft and an increase in total fleet.

Ownership costs

Higher/(lower)

€ million

2015

Year over year

Per ASK at ccy

Ownership costs

1,966

12.5%

4.3%

Number of fleet		Higher/(lower)
	2015	Year over year
Shorthaul	351	20.6%
Longhaul	178	6.0%
	529	15.3%

Operating profit

The Group's operating profit, before exceptional items, for the year was €2,335 million, a €945 million improvement from last year. This increase reflects the Group's drive towards achieving a competitive cost base with improved productivity and non-fuel cost savings. The macro economic environment was challenging, impacting passenger unit revenues but improving total unit costs and generating a net currency benefit. Our adjusted operating margin improved by 3.4 points to 11.2 per cent.

British Airways

British Airways operating profit was £1,375 million, a £400 million improvement over prior year on capacity increase of 2.0 per cent. Progress in the year was based on non-fuel unit cost improvements and from fuel benefits partially offset by weaker yields including on oil related routes.

In pound sterling terms, approximately half of the passenger revenue weakness was offset through non-fuel unit cost savings. Non-fuel unit cost savings were achieved in supplier contract terms, including maintenance and through IT initiatives. British Airways' adjusted operating margin improved 3.7 points to 12.2 per cent.

Aer Lingus

For the full year, Aer Lingus operating profit was €124 million. Excluding exceptional items*, an improvement of €72 million over last year. Capacity was increased 5.4 per cent, primarily in the longhaul.

In euro terms and influenced by a strong US dollar, Aer Lingus increased its unit revenues by 4.8 per cent with both yield and seat factor improvements. The strong dollar was also partially responsible for a lower fuel unit cost saving and for the 3.1 per cent increase in non-fuel unit costs. Efficiencies were achieved, particularly in employee unit costs.

Overall Aer Lingus improved its adjusted operating margin by 2.9 points to 8.9 per cent.

	British Airways £ million		Aer Lingus € million
	2015	Higher/(lower)	2015	Higher/(lower)
ASKs	174,274	2.0%	21,476	5.4%
Seat factor (per cent)	81.5	0.5pts	81.6	2.6pts

Passenger revenue	10,279	(1.7%)	1,628	11.3%
Cargo revenue	547	(8.5%)	53	12.8%
Other revenue	772	15.4%	37	(19.6%)
Total revenue	11,598	(1.0%)	1,718	10.4%
Fuel, oil costs and emissions charges	3,030	(13.8%)	388	4.0%
Employee costs	2,516	2.2%	331	2.8%
Supplier costs	3,800	(1.5%)	715	11.4%
EBITDAR	2,252	19.4%	284	29.7%
Ownership costs	877	(3.7%)	160	8.8%
Operating profit before exceptional items	1,375	41.0%	124	72.2%
Adjusted operating margin	12.2%	3.7pts	8.9%	2.9pts

Passenger yield (£ pence or € cents/RPK)	7.24	(4.1%)	9.29	2.2%
Unit passenger revenue (£ pence or € cents/ASK)	5.90	(3.6%)	7.58	5.6%
Total unit revenue (£ pence or € cents/ASK)	6.66	(2.9%)	8.00	4.8%
Fuel unit cost (£ pence or € cents/ASK)	1.74	(15.5%)	1.81	(1.1%)
Non-fuel unit costs (£ pence or € cents/ASK)	4.13	(2.4%)	5.62	3.1%
Total unit cost (£ pence or € cents/ASK)	5.87	(6.7%)	7.42	1.9%

* Aer Lingus 2014 comparative results exclude the cost of pension settlement which is considered exceptional in nature.

Iberia

Iberia's operating profit was €247 million, up €197 million versus last year, achieving an adjusted operating margin of 7.0 per cent. Iberia made significant progress on its Plan de Futuro, improving its cost base and recovering routes previously withdrawn. Capacity for the year was up 10.2 per cent, with a flat unit revenue performance in euro terms, driven by currency benefits from a weak euro and improvements in seat factor. On the cost side, non-fuel unit costs improve with substantial employee cost savings from lower MPEs and through supplier initiatives, including finance and IT.

The turnaround of Iberia is leading to a profitable and efficient new airline capable of growing in its strategic markets and starting to achieve positive returns for the Group with a positive profit after tax of €155 million*.

Vueling

Vueling's operating profit was €160 million with an adjusted operating margin of 11.7 per cent, up 0.2 points versus last year. Vueling continued to expand its network increasing capacity by 14.2 per cent while maintaining unit revenues broadly flat, a strong revenue performance. Non-fuel unit costs were adverse, impacted by the crew collective agreement signed in 2014, allowances attributed to the opening of new bases and additional aircraft. Supplier unit costs improved and 2015 also saw further progress on fleet flexibility and harmonisation.

Vueling continues to be the low cost carrier growth tool for the Group, expanding its network at a higher rate and increasing its presence in the intra-European point to point traffic in areas such as Rome and Paris. Even with this ambitious growth Vueling achieved one of the highest RoICs of the Group.

	Iberia € million		Vueling € million
	2015	Higher/(lower)	2015	Higher/(lower)
ASKs	59,872	10.2%	30,476	14.2%
Seat factor (per cent)	81.1	2.5pts	81.3	0.9pts

Passenger revenue	3,561	12.1%	1,962	13.7%
Cargo revenue	253	0.0%	-	-
Other revenue	950	13.5%	-	-
Total revenue	4,764	11.6%	1,962	13.7%
Fuel, oil costs and emissions charges	1,249	8.0%	533	9.2%
Employee costs	1,021	(1.4%)	189	21.2%
Supplier costs	1,774	12.6%	854	13.1%
EBITDAR	720	43.4%	386	18.4%
Ownership costs	473	4.6%	226	22.2%
Operating profit before exceptional items	247	394.0%	160	13.5%
Adjusted operating margin	7.0%	3.5pts	11.7%	0.2pts

Passenger yield (€ cents/RPK)	7.33	(1.6%)	7.92	(1.5%)
Unit passenger revenue (€ cents/ASK)	5.95	1.7%	6.44	(0.3%)
Total unit revenue (€ cents/ASK)	7.96	1.3%	6.44	(0.3%)
Fuel unit cost (€ cents/ASK)	2.09	(1.9%)	1.75	(4.4%)
Non-fuel unit costs (€ cents/ASK)	5.46	(3.2%)	4.16	1.2%
Total unit cost (€ cents/ASK)	7.55	(2.7%)	5.91	(0.5%)

* Excludes intragroup dividends received and profit on the sale of the Iberia plus (to Avios).

Exchange impact before exceptional items

Exchange rate movements are calculated by retranslating current year results as though they had been generated at prior year exchange rates. The reported results are impacted by translation currency from converting results from currencies other than euro to the Group's reporting currency of euro. From a transaction perspective, the Group performance is impacted by the fluctuation of exchange rates, primarily pound sterling, euro and US dollar. The Group exchange rates used and the estimated impact of translation and transaction exchange rates on operating profit before exceptional items are set out as follows. At constant currency, the Group's operating profit before exceptional items would have been €2,246 million, €89 million lower than the reported result.

The Group hedges its transaction exposures but not any potential impact from translation.

€ million	Higher/ (lower)
Reported revenue
Translation impact	1,652
Transaction impact	265
Total exchange impact on revenue	1,917

Reported operating expenditure
Translation impact	(1,441)
Transaction impact	(387)
Total exchange impact on operating expenditures	(1,828)

Reported operating profit
Translation impact	211
Transaction impact	(122)
Total exchange impact on operating profit	89

	2015	Higher/ (lower)
Translation
£ to €	1.37	7.9%
Transaction
£ to €	1.37	10.5%
€ to $	1.12	(16.4%)
£ to $	1.54	(6.7%)

Exceptional items

For a full list of exceptional items, refer to note 5 of the Financial statements. Below is a summary of the significant exceptional items recorded.

In 2015, net exceptional charges at the operating profit level were €17 million (2014: €361 million). The exceptional charges included in Property, IT and other relate to the Aer Lingus acquisition costs of €33 million and a legal settlement at British Airways from the 2006 cargo cartel claim. The exceptional credit in Fuel, oil and emissions reflects the impact of recording Aer Lingus fuel cost at the hedged price in the pre-exceptional column, rather than at spot price as in the reported column.

In 2014, exceptional charges were recognised relating to the restructuring provision of €260 million, a currency charge of €180 million, impairment reversal of €79 million, gain on sale of €83 million and deferred tax credit of €413 million.

Non-operating costs

Net non-operating costs after exceptional items were €517 million, up from €201 million last year. The increase is due to:

· €120 million additional losses partially unrealised on derivative instruments not qualifying for hedge accounting; and

· €75 million incremental net financing costs, including the debt raised for the acquisition of Aer Lingus and from the translation of sterling financing costs.

Taxation

The great majority of the Group's activities are taxed in the countries of effective management of the main airline operations (UK, Spain or Ireland, with corporation tax rates during 2015 of 20.25 per cent, 28 per cent and 12.5 per cent respectively). The Group's effective tax rate for the year is 20 per cent (2014: 22 per cent).

Although the Group continues to offset prior year tax losses and other tax assets against its current year taxable profit, in 2015 the Group paid corporation taxes of €245 million (2014: €118 million). This represents 13.6 per cent (2014: 14.3 per cent) of the Group's accounting profit before tax.

Profit after tax and Earnings per share (EPS)

Profit after tax before exceptional items was €1,539 million, up 77.3 per cent. The increase reflects a strong operating profit performance. Diluted earnings per share before exceptional items is one of our key performance indicators and increased by 77.6 per cent.

Dividends

The Board is proposing a final dividend to shareholders of 10 euro cents per share, which brings the full year dividend to 20 euro cents per share. The final dividend will be paid, subject to shareholder approval, on July 4, 2016 to shareholders on the register on July 1, 2016.

Liquidity and capital resources

The Group's equity free cash flow improvement in 2015 was in part due to the increase in EBITDA from stronger operating results and secondly from lower capital expenditure ('CAPEX') spend.

In 2014, the Group's CAPEX reflected a significant level of investment, in excess of a typical year and the Group's target of less than €2.5 billion. This was due primarily to the timing of aircraft delivery payments. In 2015, the Group took delivery of nine new aircraft, two Airbus A380s, five Boeing 787-900s, one Airbus A320 and one Embraer E-190.

The use of cash in working capital reflects higher prepayments including fuel, a reduction in payables primarily from lower fuel prices, and a seasonality impact from the timing of the addition of Aer Lingus.

Pension and restructuring payments increased from the Iberia restructuring plan and from foreign exchange.

The acquisition of Aer Lingus net of its cash and deposits was a cash outflow of €438 million. In contrast, in 2014 funds were received from the sale of Amadeus.

Financing and refinancing are discussed in the following section.

Adequate cash levels are maintained by each operating company. The cash balance increased by €912 million versus last year.

€ million	2015	2014
EBITDAR before exceptional	4,301	3,137
Aircraft lease costs ('rentals')	(659)	(551)
EBITDA	3,642	2,586
Interest	(197)	(159)
Tax	(245)	(118)
Capex	(2,040)	(2,622)
Equity free cash flow	1,160	(313)
Movement in working capital and other non-cash	(658)	(150)
Pension and restructuring	(588)	(457)
Acquisition of subsidiary (net of cash and deposits) / divestment of investment	(438)	589
Dividend paid	(163)	-
Net financing and refinancing	1,067	1,000
Other investing movements	366	455
Other financing movements	(184)	(43)
Cash in flow	562	1,081
Opening cash, cash equivalents and interest bearing deposits	4,944	3,633
Net foreign exchange differences	350	230
Cash and cash equivalents and other interest-bearing deposits	5,856	4,944

€ million	2015	2014
British Airways	2,806	3,206
Iberia	832	870
Aer Lingus	772	-
Vueling	633	651
IAG and other Group companies	813	217
Cash and cash equivalents and interest-bearing deposits	5,856	4,944

Net debt and adjusted net debt

€ million	2015	2014	Higher / (lower)
Debt	(6,617)	(5,122)	(1,495)
Cash and cash equivalents and interest bearing deposits	4,944	3,633	1,311
Net debt at January 1	(1,673)	(1,489)	(184)
Increase in cash net of exchange	-	1,311	(1,311)
Net cash outflow from repayments of debt and lease financing	1,026	1,009	17
New borrowings and finance leases	(905)	(2,009)	1,104
Increase in net debt from regular financing	121	(1,000)	1,121
Debt acquired	(406)	-	(406)
Cash and cash equivalents and interest bearing deposits acquired	913	-	913
Net debt through Business combination	507	-	507
Financing raised for acquisition	(1,087)	-	(1,087)
Exchange and other non-cash movements	(642)	(495)	(147)
Net debt at December 31	(2,774)	(1,673)	(1,101)
Capitalised aircraft lease costs	(5,736)	(4,408)	(1,328)
Adjusted net debt at December 31	(8,510)	(6,081)	(2,429)

Capital risk management

IAG's objectives when managing capital are to safeguard the Group's ability to continue as a going concern, to maintain an optimal capital structure in order to optimise the cost of capital and to provide future returns to shareholders. The Group monitors capital using adjusted gearing and adjusted net debt to EBITDAR.

Cash net of exchange was flat versus last year including the payment of an interim dividend and partial financing of the Group's acquisition of Aer Lingus. Regular net refinancing was broadly balanced with a slight decrease in debt of €121 million.

The Group's regular net debt reduced by €507 million from the addition of Aer Lingus, reflecting its strong cash position and its mix of operating versus financing leases.

IAG launched two tranches of convertible bonds totalling €1 billion to finance the Aer Lingus acquisition, of which €118 million is recognised as equity.

Capitalised aircraft lease costs rose from the addition of Aer Lingus and from an increase in leased aircraft at British Airways.

Adjusted net debt rose to €8,510 million, however financial headroom improved as adjusted net debt to EBITDAR remained flat at 1.9 times.

The Group generated sufficient equity free cash flow in 2015 to support the recommendation of an interim and final cash dividend of €407 million for its shareholders with equity free cash coverage of 2.8 times.

Capital commitments and off balance sheet arrangements

Capital expenditure authorised and contracted for amounted to €16,091 million (2014: €11,604 million) for the Group. The majority of this is in US dollars and includes commitments until 2022 for 118 aircraft from the Airbus A320 family, 29 Boeing 787s, 43 Airbus A350s, 14 Airbus A330s and 2 Airbus A380s.

IAG does not have any other off-balance sheet financing arrangements.

Strategic framework

Our mission is to be the leading international airline Group. This means we will:

· win the customer through service and value across our global network;

· deliver higher returns to our shareholders through leveraging cost and revenue opportunities across the Group;

· attract and develop the best people in the industry;

· provide a platform for quality international airlines, leaders in their markets, to participate in consolidation;

· retain the distinct cultures and brands of individual airlines.

By accomplishing our mission, IAG will help to shape the future of the industry, set new standards of excellence and provide sustainability, security and growth.

IAG's six core strategic objectives are:

· Leadership in IAG's main cities;

· Leadership across the Atlantic;

· Stronger Europe-to-Asia position in critical markets;

· Grow share of Europe-to-Africa routes;

· Stronger intra-Europe profitability; and

· Competitive cost positions across our businesses.

Principal risks and uncertainties

During the year we have continued to maintain and operate our structure and processes to identify, assess and manage risks. The principal risks and uncertainties affecting us, detailed on pages 87 to 93 of the Annual Report and Accounts 2014, remain relevant. The economic conditions in our main markets remained robust in 2015 but there is more uncertainty as we move into 2016 with the combination of low commodity prices and reduced China growth impacting African and South American economies. We have also seen an increase in the risk of financial loss, disruption or damage to our reputation as the frequency and sophistication of cyber attacks on corporates increases; as a result we have increased the resources we devote to cyber defence.

INTERNATIONAL CONSOLIDATED AIRLINES GROUP S.A.

Unaudited Full year Condensed Consolidated Financial Statements

January 1, 2015 - December 31, 2015

CONSOLIDATED INCOME STATEMENT
	Year to December 31
€ million	Before exceptional items 2015	Exceptional items	Total 2015	Before exceptional items 2014	Exceptional items	Total 2014
Passenger revenue	20,350		20,350	17,825		17,825
Cargo revenue	1,024		1,024	992		992
Other revenue	1,484		1,484	1,353		1,353
Total revenue	22,858		22,858	20,170		20,170
Employee costs	4,905		4,905	4,325	260	4,585
Fuel, oil costs and emissions charges	6,082	(51)	6,031	5,987		5,987
Handling, catering and other operating costs	2,371		2,371	2,063		2,063
Landing fees and en-route charges	1,882		1,882	1,555		1,555
Engineering and other aircraft costs	1,395		1,395	1,276		1,276
Property, IT and other costs	965	68	1,033	927		927
Selling costs	912		912	859		859
Depreciation, amortisation and impairment	1,307		1,307	1,196	(79)	1,117
Aircraft operating lease costs	659		659	551		551
Currency differences	45		45	41	180	221
Total expenditure on operations	20,523	17	20,540	18,780	361	19,141
Operating profit	2,335	(17)	2,318	1,390	(361)	1,029

Finance costs	(294)		(294)	(237)		(237)
Finance income	42		42	32		32
Net currency retranslation charges	(56)		(56)	(27)		(27)
Losses on derivatives not qualifying for hedge accounting	(170)		(170)	(49)		(49)
Net gain related to available-for-sale financial assets	5		5	10	83	93
Share of profits in investments accounted for using the equity method	6		6	2		2
Loss on sale of property, plant and equipment and investments	(38)		(38)	(11)		(11)
Net financing charge relating to pensions	(12)		(12)	(4)		(4)
Profit before tax	1,818	(17)	1,801	1,106	(278)	828
Tax	(279)	(6)	(285)	(238)	413	175
Profit after tax for the year	1,539	(23)	1,516	868	135	1,003

Attributable to:
Equity holders of the parent	1,518		1,495	847		982
Non-controlling interest	21		21	21		21
	1,539		1,516	868		1,003


Basic earnings per share (€ cents)	74.6		73.5	41.6		48.2
Diluted earnings per share (€ cents)	71.4		70.4	40.2		46.4

CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME


	Year to December 31
€ million	2015	2014
Items that may be reclassified subsequently to net profit
Cash flow hedges:
Fair value movements in equity	(1,104)	(1,235)
Reclassified and reported in net profit	1,290	357
Available-for-sale financial assets:
Fair value movements in equity	(9)	29
Reclassified and reported in net profit	(5)	(359)
Currency translation differences	181	168

Items that will not be reclassified to net profit
Remeasurements of post-employment benefit obligations	156	(394)
Total other comprehensive income for the year, net of tax	509	(1,434)
Profit after tax for the year	1,516	1,003
Total comprehensive income for the year	2,025	(431)

Total comprehensive income is attributable to:
Equity holders of the parent	2,004	(452)
Non-controlling interest	21	21
	2,025	(431)

Items in the consolidated Statement of other comprehensive income above are disclosed net of tax.

CONSOLIDATED BALANCE SHEET
€ million	December 31, 2015	December 31, 2014
Non-current assets
Property, plant and equipment	13,672	11,784
Intangible assets	3,246	2,438
Investments accounted for using the equity method	41	27
Available-for-sale financial assets	74	84
Employee benefit assets	957	855
Derivative financial instruments	62	80
Deferred tax assets	723	769
Other non-current assets	365	188
	19,140	16,225
Current assets
Non-current assets held for sale	5	18
Inventories	520	424
Trade receivables	1,196	1,252
Other current assets	1,235	602
Current tax receivable	79	9
Derivative financial instruments	198	178
Other current interest-bearing deposits	2,947	3,416
Cash and cash equivalents	2,909	1,528
	9,089	7,427
Total assets	28,229	23,652

Shareholders' equity
Issued share capital	1,020	1,020
Share premium	5,867	5,867
Treasury shares	(113)	(6)
Other reserves	(1,548)	(3,396)
Total shareholders' equity	5,226	3,485
Non-controlling interest	308	308
Total equity	5,534	3,793
Non-current liabilities
Interest-bearing long-term borrowings	7,498	5,904
Employee benefit obligations	858	1,324
Deferred tax liability	419	278
Provisions for liabilities and charges	2,049	1,967
Derivative financial instruments	282	359
Other long-term liabilities	223	226
	11,329	10,058
Current liabilities
Current portion of long-term borrowings	1,132	713
Trade and other payables	3,803	3,281
Deferred revenue on ticket sales	4,374	3,933
Derivative financial instruments	1,328	1,313
Current tax payable	124	57
Provisions for liabilities and charges	605	504
	11,366	9,801
Total liabilities	22,695	19,859
Total equity and liabilities	28,229	23,652

CONSOLIDATED CASH FLOW STATEMENT
	Year to December 31
€ million	2015	2014
Cash flows from operating activities
Operating profit	2,318	1,029
Depreciation, amortisation and impairment	1,307	1,117
Movement in working capital and other non-cash movements	(627)	205
Payments related to restructuring (net of provision)	(154)	212
Employer contributions to pension schemes	(699)	(612)
Pension scheme service costs	265	203
Interest paid	(197)	(159)
Taxation	(245)	(118)
Net cash flows from operating activities from continuing operations	1,968	1,877
Net cash flows used in operating activities from discontinued operations	-	(15)
Net cash flows from operating activities	1,968	1,862

Cash flows from investing activities
Acquisition of property, plant and equipment and intangible assets	(2,040)	(2,622)
Sale of property, plant and equipment and intangible assets	273	404
Net proceeds from sale of investments	6	589
Acquisition of subsidiary (net of cash acquired)	(1,146)	-
Interest received	48	37
Decrease/(increase) in other current interest-bearing deposits	1,436	(1,352)
Dividends received	9	2
Other investing movements	30	12
Net cash flows from investing activities	(1,384)	(2,930)

Cash flows from financing activities
Net proceeds from long-term borrowings	2,757	2,009
Net proceeds from equity portion of convertible bond issued	101	-
Repayment of borrowings	(954)	(223)
Repayment of finance leases	(837)	(786)
Acquisition of treasury shares	(163)	(23)
Distributions made to holders of perpetual securities and other	(21)	(20)
Dividend paid	(163)	-
Net cash flows from financing activities	720	957

Net increase/(decrease) in cash and cash equivalents	1,304	(111)
Net foreign exchange differences	77	98
Cash and cash equivalents at 1 January	1,528	1,541
Cash and cash equivalents at year end	2,909	1,528

Interest-bearing deposits maturing after more than three months	2,947	3,416

Cash, cash equivalents and other interest-bearing deposits	5,856	4,944

At December 31, 2015 Aer Lingus held €49 million of restricted cash within interest-bearing deposits maturing after more than three months relating to the pension escrow.
At December 31, 2015 British Airways held €72 million equivalent of restricted cash in Nigeria.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year to December 31, 2015

	Issued share capital	Share premium	Treasury shares	Other reserves⁽¹⁾	Total shareholders' equity	Non-controlling interest	Total equity

€ million
January 1, 2015	1,020	5,867	(6)	(3,396)	3,485	308	3,793

Total comprehensive income for the year (net of tax)	-	-	-	2,004	2,004	21	2,025

Cost of share-based payments	-	-	-	45	45	-	45
Vesting of share-based payment schemes	-	-	56	(99)	(43)	-	(43)
Equity portion of convertible bond issued	-	-	-	101	101	-	101
Acquisition of treasury shares	-	-	(163)	-	(163)	-	(163)
Dividend	-	-	-	(203)	(203)	-	(203)
Dividend of a subsidiary	-	-	-	-	-	(1)	(1)
Distributions made to holders of perpetual securities	-	-	-	-	-	(20)	(20)
December 31, 2015	1,020	5,867	(113)	(1,548)	5,226	308	5,534

⁽¹⁾Closing balance includes retained earnings of €1,160 million (excluding pensions restatement: retained earnings of €3,209 million).

For the year to December 31, 2014
	Issued share capital	Share premium	Treasury shares	Other reserves⁽¹⁾	Total shareholders' equity	Non-controlling interest	Total equity

€ million
January 1, 2014	1,020	5,867	(42)	(2,936)	3,909	307	4,216

Total comprehensive income for the year (net of tax)	-	-	-	(452)	(452)	21	(431)

Cost of share-based payments	-	-	-	38	38	-	38
Vesting of share-based payment schemes	-	-	59	(46)	13	-	13
Acquisition of treasury shares	-	-	(23)	-	(23)	-	(23)
Distributions made to holders of perpetual securities	-	-	-	-	-	(20)	(20)
December 31, 2014	1,020	5,867	(6)	(3,396)	3,485	308	3,793

⁽¹⁾Closing balance includes a retained deficit of €234 million (excluding pensions restatement: retained earnings of €1,815 million).

1. Corporate Information AND BASIS OF PREPARATION

International Consolidated Airlines Group S.A. (hereinafter 'International Airlines Group', 'IAG' or the 'Group') is a leading European airline group, formed to hold the interests of airline and ancillary operations. IAG is a Spanish company registered in Madrid and was incorporated on April 8, 2010. On January 21, 2011 British Airways Plc and Iberia Líneas Aéreas de España S.A. Operadora (hereinafter 'British Airways' and 'Iberia' respectively) completed a merger transaction becoming the first two airlines of the Group. Vueling Airlines S.A. ('Vueling') was acquired on April 26, 2013, and Aer Lingus Group Plc ('Aer Lingus') on August 18, 2015.

IAG shares are traded on the London Stock Exchange's main market for listed securities and also on the stock exchanges of Madrid, Barcelona, Bilbao and Valencia (the 'Spanish Stock Exchanges'), through the Spanish Stock Exchanges Interconnection System (Mercado Continuo Español).

The Group's full year condensed consolidated financial statements for the year to December 31, 2015 were prepared in accordance with IAS 34 and authorised for issue by the Board of Directors on February 25, 2016. The condensed financial statements herein are not the Company's statutory accounts and are unaudited. The Directors consider that the Group has adequate resources to remain in operation for the foreseeable future and have therefore continued to adopt the going concern basis in preparing the condensed financial statements.

The basis of preparation and accounting policies set out in the IAG Annual Report and Accounts for the year to December 31, 2014 have been applied in the preparation of these condensed consolidated financial statements, except as disclosed in note 2. IAG's financial statements for the year to December 31, 2014 have been filed with the Registro Mercantil de Madrid, and are in accordance with the International Financial Reporting Standards as adopted by the European Union (IFRSs as adopted by the EU) and with those of the Standing Interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC) of the International Accounting Standards Board (IASB). The report of the auditors on those financial statements was unqualified.

On August 18, 2015 the Group acquired 100 per cent of the issued ordinary share capital of Aer Lingus, for a total of €1,351 million.

2. Accounting Policies

The Group has adopted the following standards, interpretations and amendments for the first time in the year to December 31, 2015:

IFRIC 21 'Levies'; effective for periods beginning on or after June 17, 2014. IFRIC 21 clarifies that an entity recognises a liability for a levy when the activity that triggers payment, as identified by the relevant legislation, occurs. For a levy that is triggered upon reaching a minimum threshold, the interpretation clarifies that no liability should be anticipated before the specified minimum threshold is reached. Retrospective application is required for IFRIC 21. The application of this amendment had no impact on the Group's net profit or net assets.

Other amendments resulting from improvements to IFRSs did not have any impact on the accounting policies, financial position or performance of the Group. The Group has not early adopted any standard, interpretation or amendment that has been issued but is not yet effective.

3. Business combination

On August 18, 2015, the Group acquired 540,310,400 shares, representing 100 per cent of the issued ordinary share capital of Aer Lingus Group for €2.55 per share, comprising a cash payment of €2.50 per share and payment of a cash dividend by Aer Lingus of €0.05 per share (payable on May 29, 2015 to Aer Lingus shareholders on the register of members on May 1, 2015).

The acquisition will provide substantial benefits through an enhanced network, particularly to North America, using Dublin as a natural gateway hub for transatlantic routes.

Transaction costs related to the acquisition of Aer Lingus totalling €33 million were recognised within Property, IT and other costs in the Income statement for the year to December 31, 2015.

From August 18, 2015 Aer Lingus' contribution to the consolidated Group results was revenue of €622 million, and an operating profit of €32 million. Had Aer Lingus been consolidated from January 1, 2015, the Group would have reported total revenue of €23,955 million and an operating profit after exceptional items of €2,410 million for the year to December 31, 2015. At December 31, 2015 the fair value of the assets and liabilities acquired were provisional, pending the finalisation of the property, plant and equipment and landing rights valuation exercise.

The provisional fair values of the assets and liabilities arising from the acquisition are as follows:

	€ million	Fair value
	Property, plant and equipment	721
	Intangible assets
	Brand	110
	Landing rights⁽¹⁾	172
	Other	40
	Other non-current assets	164

	Cash and cash equivalents	205
	Other current interest-bearing deposits	708
	Trade receivables⁽²⁾	54
	Other current assets	66

	Interest-bearing borrowings	(406)
	Trade and other payables	(604)
	Provision for liabilities and charges	(158)
	Employee benefit obligations	(9)
	Deferred tax liability	(35)
	Net identifiable assets acquired	1,028

⁽¹⁾For indefinite lived landing rights, see note 12.

⁽²⁾The gross contractual amount for trade receivables is €55 million, 98 per cent of which is expected to be collected.

	The goodwill is recognised as follows:

	€ million
	Cash consideration⁽¹⁾		1,351
	Provisional fair value of identifiable net assets		1,028
	Provisional goodwill		323

⁽¹⁾There is no deferred or contingent consideration.

None of the goodwill recognised is expected to be deductible for tax purposes.

4. Exceptional items

	Year to December 31
€ million	2015	2014
Business combination costs⁽¹⁾	33	-
Pre-acquisition cash flow hedge impact⁽²⁾	(51)	-
Litigation provision⁽³⁾	35	-
Foreign currency loss⁽⁴⁾	-	180
Restructuring costs - employee⁽⁵⁾	-	260
Reversal of Iberia brand impairment⁽⁶⁾	-	(79)
Recognised in expenditure on operations	17	361
Gain on sale of investment⁽⁷⁾	-	(83)
Total exceptional charge before tax	17	278
Tax on exceptional items	6	(144)
Net deferred tax credit⁽⁸⁾	-	(269)
Total exceptional charge/(credit) after tax	23	(135)

⁽¹⁾Business combination costs

Transaction expenses of €33 million were recognised in relation to the Aer Lingus Business combination in the year to December 31, 2015 (note 3).

⁽²⁾Derivatives and financial instruments

On August 18, 2015, Aer Lingus had a portfolio of cash flow hedges related to fuel with a net mark-to-market charge of €99 million recorded within Other reserves on the Balance sheet. As these cash flow hedge positions unwind, Aer Lingus will recycle the impact from Other reserves.

The Group does not recognise the pre-acquisition cash flow hedge net position within Other reserves on the Balance sheet, resulting in fuel costs being gross of the pre-acquisition cash flow hedge positions. For the year to December 31, 2015 this has resulted in a decrease in reported fuel expense of €51 million and a related €6 million tax charge.

⁽³⁾Litigation provision

The litigation provision represents the continuation of the civil claims brought against British Airways in 2006. This provision represents a settled case against British Airways in the cargo claim, for a total of €35 million. The final amount required to pay the remaining claims detailed in note 19 is subject to significant uncertainty.

In the year to December 31, 2014:

⁽⁴⁾Foreign currency loss

Since December 2012 repatriation of funds from Venezuela has been limited. Throughout 2013, Iberia recognised net sales at 6.3 bolívares (CADIVI) to the US dollar. The unrepatriated cash at the end of 2013 was €184 million.

From February to October 2014, Iberia recognised net sales at 11 bolívares to the US dollar (SICAD I) since this was the official rate at which Iberia was authorised by the Venezuelan government to repatriate cash. In the third quarter of 2014, Iberia received funds for February to June 2014 at SICAD I and given the ongoing negotiations, the €184 million of unrepatriated funds from 2013 and January 2014 were also revalued to SICAD I. An exceptional charge of €82 million was recognised.

Iberia was unable to repatriate any further funds earned prior to February 2014 or subsequent to June 2014. Given this and combined with the lack of liquidity in Venezuela, the decrease in the Brent barrel price and a government recognised inflation rate of 65 per cent, Iberia determined that SICAD I could no longer be considered available in practice, for the repatriation of the funds. The next alternative rate available at December 31, 2014 was the SICAD II rate of 50 bolívares (Bs.) to the US dollar which Iberia considered to better reflect the economic reality. This rate was applied since November 2014. All remaining funds, which approximately amount to Bs 1.7 billion were revalued to SICAD II resulting in an additional exceptional charge of €98 million. The cash balance at December 31, 2014 was €18 million. A related tax credit of €54 million was recognised.

⁽⁵⁾Restructuring costs

In the year to December 31, 2014, a restructuring expense of €260 million was recognised in relation to the Iberia Transformation Plan and the agreement on collective redundancies for pilots and ground staff. A related tax credit of €78 million was recognised.

4. Exceptional items continued

⁽⁶⁾Reversal of Iberia Brand impairment

In 2014, the partial impairment made in 2012 of the Iberia Brand of €79 million was reversed. This followed the approval of the five year Business plan including capacity growth and Iberia's return to profitability, which supported the reversal of the Brand impairment (note 12). A related tax charge of €24 million was recognised.

⁽⁷⁾Gain on sale of investment

During the third quarter of 2014, Iberia entered into an agreement to settle its hedging transaction over its ownership interest in Amadeus IT Holding S.A. The derivative transaction comprised a collar arrangement on Iberia's Amadeus shareholding of 33,562,331 ordinary shares.

The settlement commenced in August 2014 and occurred in equal instalments over a 100 trading day period. At December 31, 2014 Iberia had settled 99 per cent of the transaction and the resulting €83 million gain was recognised in the Net credit related to available-for-sale financial assets line. A related €36 million tax credit was recognised.

⁽⁸⁾Net deferred tax credit

In 2014, the Group recognised a €306 million deferred tax asset relating to losses incurred by Iberia from 2013 and 2012. Recognition is based on Management's expectation of the recoverability of these losses against future profits. Recoverability was based on the improved operating performance in the prior year and from the projections included within the Business plan.

During 2014, the Spanish government enacted a number of changes as part of the Spanish Tax Reform, including the phased reduction of corporation tax rate from 30 per cent to 25 per cent and a change in loss utilisation rules. This was the first tax rate change since 2008. A related tax charge of €37 million was also recognised.

5. SEASONALITY

The Group's business is highly seasonal with demand strongest during the summer months. Accordingly higher revenues and operating profits are usually expected in the latter six months of the financial year than in the first six months.

6. SEGMENT INFORMATION

a. Business segments

British Airways, Iberia, Vueling and Aer Lingus are managed as individual operating companies. Each airline operates its network operations as a single business unit. The chief operating decision maker is responsible for allocating resources and assessing performance of the operating segments, and has been identified as the IAG Management Committee. The IAG Management Committee makes resource allocation decisions based on network profitability, primarily by reference to the passenger markets in which the companies operate. The objective in making resource allocation decisions is to optimise consolidated financial results. Therefore, based on the way the Group treats its businesses, and the manner in which resource allocation decisions are made, the Group has four (2014: three) reportable operating segments for financial reporting purposes, reported as British Airways, Iberia, Vueling and Aer Lingus. Other Group companies include head office companies.

For the year to December 31, 2015	2015
€ million	British Airways	Iberia	Vueling	Aer Lingus	Other Group companies	Total
Revenue
External revenue	15,862	4,412	1,962	622	-	22,858
Inter-segment revenue	53	352	-	-	145	550
Segment revenue	15,915	4,764	1,962	622	145	23,408

Depreciation, amortisation and impairment	(1,053)	(206)	(13)	(27)	(8)	(1,307)
Operating profit/(loss) before exceptional items	1,914	247	160	35	(21)	2,335

Exceptional items (note 4)	(35)	-	-	(3)	21	(17)
Operating profit after exceptional items	1,879	247	160	32	-	2,318

Net non-operating costs						(517)
Profit before tax						1,801

6. SEGMENT INFORMATION continued

a. Business segments

For the year to December 31, 2014	2014
€ million	British Airways	Iberia	Vueling	Other Group companies	Total
Revenue
External revenue	14,456	3,989	1,725	-	20,170
Inter-segment revenue	37	279	-	107	423
Segment revenue	14,493	4,268	1,725	107	20,593

Depreciation, amortisation and impairment	(1,027)	(76)	(11)	(3)	(1,117)
Operating profit/(loss) before exceptional items	1,215	50	141	(16)	1,390

Exceptional items (note 4)	-	(361)	-	-	(361)
Operating profit/(loss) after exceptional items	1,215	(311)	141	(16)	1,029

Net non-operating costs					(201)
Profit before tax					828

b. Geographical analysis

Revenue by area of original sale
	Year to December 31
€ million	2015	2014
UK	8,256	6,931
Spain	3,462	3,203
USA	3,447	2,893
Rest of world	7,693	7,143
	22,858	20,170

Assets by area

December 31, 2015
€ million	Property, plant and equipment	Intangible assets
UK	11,112	1,346
Spain	1,798	1,852
USA	26	14
Rest of world	736	34
Total	13,672	3,246

December 31, 2014

€ million
UK	10,131	1,184
Spain	1,624	1,218
USA	24	12
Rest of world	5	24
Total	11,784	2,438

7. FINANCE COSTS AND INCOME

	Year to December 31
€ million	2015	2014
Finance costs
Interest payable on bank and other loans, finance charges payable under finance leases	(276)	(211)
Unwinding of discount on provisions	(21)	(39)
Capitalised interest on progress payments	2	2
Change in fair value of cross currency swaps	1	(5)
Currency credits on financial fixed assets	-	16
Total finance costs	(294)	(237)
Finance income
Interest on other interest-bearing deposits	42	32
Total finance income	42	32
Net charge relating to pensions
Net financing charge relating to pensions	(12)	(4)
Net financing charge relating to pensions	(12)	(4)

8. Tax

The tax charge for the year to December 31, 2015 is €285 million (2014: €175 million credit), and the effective tax rate is 20 per cent.

Following announcements in the recent UK budget, legislation was enacted in the last quarter of the year reducing the UK rate of corporation tax to 19 per cent effective from April 1, 2017 and 18 per cent effective from April 1, 2020. The effect of the corporation tax rate reduction is a deferred tax credit of €83 million through the income statement.

9. EARNINGS PER SHARE

The number of shares in issue at December 31, 2015 and 2014 was 2,040,078,523 ordinary shares with a par value of €0.50 each.

	Year to December 31
Millions	2015	2014
Weighted average number of ordinary shares in issue	2,034	2,036
Weighted average number for diluted earnings per share	2,160	2,162

	Year to December 31
€ cents	2015	2014
Basic earnings per share	73.5	48.2
Diluted earnings per share	70.4	46.4

10. DIVIDENDS

€ million	2015	2014
Cash dividend declared
Interim dividend of 10 € cents per share	(203)	-

Proposed cash dividend
Final dividend of 10 € cents per share	(204)	-

The proposed dividend would consist of 5 € cents per share from net profit for the year to December 31, 2015 and 5 € cents per share from share premium.

Proposed dividends on ordinary shares are subject to approval at the annual general meeting and are not recognised as a liability at December 31, 2015.

11. PROPERTY, PLANT AND EQUIPMENT AND INTANGIBLE ASSETS

€ million	Property, plant and equipment	Intangible assets
Net book value at January 1, 2015	11,784	2,438
Additions	1,937	168
Acquired through Business combination	721	645
Disposals	(248)	(36)
Reclassifications	(96)	12
Depreciation, amortisation and impairment	(1,227)	(75)
Exchange movements	801	94
Net book value at December 31, 2015	13,672	3,246

€ million	Property, plant and equipment	Intangible assets
Net book value at January 1, 2014	10,228	2,196
Additions	2,499	138
Disposals	(404)	-
Depreciation, amortisation and impairment	(1,152)	(44)
Impairment reversal	-	79
Exchange movements	613	69
Net book value at December 31, 2014	11,784	2,438

Capital expenditure authorised and contracted but not provided for in the accounts amounts to €16,091 million (December 31, 2014: €11,604 million). The majority of capital expenditure commitments are denominated in US dollars, and as such are subject to changes in exchange rates.

12. IMPAIRMENT REVIEW

The carrying amounts of intangible assets with indefinite life and goodwill allocated to cash generating units (CGUs) of the Group are:

€ million	Goodwill	Landing rights	Brand	Customer loyalty programmes	Total
2015
Iberia
January 1, 2015	-	423	306	253	982
Transfer to Avios	-	-	-	(253)	(253)
December 31, 2015	-	423	306	-	729

British Airways
January 1, 2015	51	840	-	-	891
Exchange movements	5	61	-	-	66
December 31, 2015	56	901	-	-	957

Vueling
January 1 and December 31, 2015	28	89	35	-	152

Aer Lingus
January 1, 2015	-	-	-	-	-
Additions due to Business combination	323	62	110	-	495
December 31, 2015	323	62	110	-	495

Avios
January 1, 2015	-	-	-	-	-
Transfer from Iberia	-	-	-	253	253
December 31, 2015	-	-	-	253	253

December 31, 2015	407	1,475	451	253	2,586

12. IMPAIRMENT REVIEW continued

€ million	Goodwill	Landing rights	Brand	Customer loyalty programmes	Total
2014
Iberia
At January 1, 2014	-	423	227	253	903
Impairment reversal	-	-	79	-	79
December 31, 2014	-	423	306	253	982

British Airways
At January 1, 2014	48	789	-	-	837
Additions	-	1	-	-	1
Exchange movements	3	50	-	-	53
December 31, 2014	51	840	-	-	891

Vueling
At January 1 and December 31, 2014	28	89	35	-	152

December 31, 2014	79	1,352	341	253	2,025

During the year to December 31, 2015 the Group acquired Aer Lingus, which has been identified as a CGU consistent with the other airlines in the Group. For the year to December 31, 2015 the Group did not conduct an impairment review for the Aer Lingus CGU as the fair value allocations were completed on a provisional basis (note 3). In the absence of any indicators of impairment, it is not considered necessary to carry out an impairment review at December 31, 2015 as goodwill and other intangible assets with indefinite life have been allocated on a provisional basis.

Basis for calculating recoverable amount

The recoverable amounts of CGUs have been measured based on their value-in-use.

Value-in-use is calculated using a discounted cash flow model, with the royalty methodology used for brands. Cash flow projections are based on the Business plan approved by the Board covering a five year period. Cash flows extrapolated beyond the five year period are projected to increase based on long-term growth rates. Cash flow projections are discounted using the CGU's pre-tax discount rate.

Annually the Group prepares and approves five year business plans. Business plans were approved in the fourth quarter of the year. The business plan cash flows used in the value-in-use calculations reflect all restructuring of the business that has been approved by the Board and which can be executed by Management under existing agreements.

Key assumptions

For each of the airline CGUs the key assumptions used in the value-in-use calculations are as follows:

	2015
Per cent	British Airways	Iberia	Vueling
Lease adjusted operating margin	12-15	8-14	12-15
Average ASK growth per annum	2-3	7	10
Long-term growth rate	2.5	2.0	2.0
Pre-tax discount rate	8.6	9.7	10.3

	2014
Per cent	British Airways	Iberia	Vueling
Long-term growth rate	2.5	2.2	2.2
Pre-tax discount rate	10.0	10.2	12.5

Lease adjusted operating margin is the average annual operating result, adjusted for aircraft operating lease costs, as a percentage of revenue over the five year Business plan to 2020. It is presented within a percentage point range and is based on past performance, Management's expectation of the market development and incorporating risks into the cash flow estimates.

ASK growth is the average annual increase over the Business plan, based on past performance and Management's expectation of the market.

12. IMPAIRMENT REVIEW continued

The long-term growth rate is calculated for each CGU based on the forecasted weighted average exposure in each primary market using gross domestic product (GDP) (source: Oxford Economics/Haver Analytics). This is amended from time-to-time to reflect specific market risk.

Pre-tax discount rates represent the current market assessment of the risks specific to each CGU, taking into consideration the time value of money and underlying risks of its primary market. The discount rate calculation is based on the circumstances of the airline industry, the Group and its CGU. It is derived from the weighted average cost of capital (WACC). The WACC takes into consideration both debt and equity available to airlines. The cost of equity is derived from the expected return on investment by airline investors and the cost of debt is broadly based on the Group's interest-bearing borrowings. CGU specific risk is incorporated by applying individual beta factors which are evaluated annually based on available market data. The pre-tax discount rate reflects the timing of future tax flows. The change in discount rate for 2015 reflects a reduction in risk free rates and lower financing costs.

The impairment test of the Avios CGU was based on a value-in-use calculation with a long-term growth rate assumption of 2.4 per cent and a pre-tax discount rate of 9.1 per cent.

Summary of results

In 2015, Management reviewed the recoverable amount of each of its CGUs with the exception of Aer Lingus and concluded the recoverable amounts exceeded the carrying values. As a result, no further tests of brands, customer loyalty programmes or landing rights were performed.

The impairment test of the Iberia brand was reassessed in 2014, given the excess of the Iberia CGU recoverable amount over its carrying value. The reassessment included determining the Iberia brand recoverable amount using the royalty methodology, with a royalty rate of 0.60 per cent. Using this methodology, the recoverable amount of the Iberia CGU was €6,400 million. Individually and in combination, the value-in-use tests of the Iberia CGU and of the Iberia Brand supported the reversal of the original €79 million impairment. In 2014, this was recorded as an exceptional credit within Depreciation, amortisation and impairment in the Income Statement.

Sensitivities

Additional sensitivities have been considered at the overall CGU level.

No reasonable possible change in the key assumptions for any of the Group's CGUs would cause the carrying amounts to exceed the recoverable amounts.

13. NON-CURRENT ASSETS HELD FOR SALE

The non-current assets held for sale of €5 million represent three Boeing 737-400 airframes and nine Boeing 737-400 engines that have been stood down from use and are being marketed for sale. These are held at cost less accumulated depreciation and impairment. Total impairment charges recognised in the Income statement relating to these assets during the year was €5 million (2014: nil). These are presented within the British Airways operating segment and will exit the business within 12 months of December 31, 2015.

Assets held for sale with a net book value of €17 million were disposed of during the year to December 31, 2015, of which €11 million related to the sale of the remaining 0.075 per cent investment in Amadeus (which represented one settlement day outstanding) and resulted in a gain of €1 million, and €6 million related to the sale of five Boeing 737 engines, resulting in a loss of €4 million.

At December 31, 2014 the non-current assets held for sale of €18 million represented one settlement day outstanding for the remaining investment of 0.075 per cent in Amadeus (€11 million) and six Boeing 737 engines (€7 million). These were presented within the Iberia and British Airways segments respectively.

14. FINANCIAL INSTRUMENTS

a. Financial assets and liabilities by category

The detail of the Group's ﬁnancial instruments at December 31, 2015 and December 31, 2014 by nature and classiﬁcation for measurement purposes is as follows:

December 31, 2015	Financial assets
€ million	Loans and receivables	Derivatives used for hedging	Available-for-sale	Non-financial assets	Total carrying amount by balance sheet item
Non-current assets
Available-for-sale financial assets	-	-	74	-	74
Derivative financial instruments	-	62	-	-	62
Other non-current assets	345	-	-	20	365

Current assets
Trade receivables	1,196	-	-	-	1,196
Other current assets	545	-	-	690	1,235
Non-current assets held for sale	-	-	-	5	5
Derivative financial instruments	-	198	-	-	198
Other current interest-bearing deposits	2,947	-	-	-	2,947
Cash and cash equivalents	2,909	-	-	-	2,909


		Financial liabilities
€ million		Loans and payables	Derivatives used for hedging	Non-financial liabilities	Total carrying amount by balance sheet item
Non-current liabilities
Interest-bearing long-term borrowings		7,498	-	-	7,498
Derivative financial instruments		-	282	-	282
Other long-term liabilities		10	-	213	223

Current liabilities
Current portion of long-term borrowings		1,132	-	-	1,132
Trade and other payables		3,442	-	361	3,803
Derivative financial instruments		-	1,328	-	1,328


December 31, 2014	Financial assets
€ million	Loans and receivables	Derivatives used for hedging	Available-for-sale	Non-financial assets	Total carrying amount by balance sheet item
Non-current assets
Available-for-sale financial assets	-	-	84	-	84
Derivative financial instruments	-	80	-	-	80
Other non-current assets	167	-	-	21	188

Current assets
Trade receivables	1,252	-	-	-	1,252
Other current assets	244	-	-	358	602
Non-current assets held for sale	-	-	11	7	18
Derivative financial instruments	-	178	-	-	178
Other current interest-bearing deposits	3,416	-	-	-	3,416
Cash and cash equivalents	1,528	-	-	-	1,528

14. FINANCIAL INSTRUMENTS continued

a. Financial assets and liabilities by category

	Financial liabilities
€ million	Loans and payables	Derivatives used for hedging	Non-financial liabilities	Total carrying amount by balance sheet item
Non-current liabilities
Interest-bearing long-term borrowings	5,904	-	-	5,904
Derivative financial instruments	-	359	-	359
Other long-term liabilities	7	-	219	226

Current liabilities
Current portion of long-term borrowings	713	-	-	713
Trade and other payables	3,017	-	264	3,281
Derivative financial instruments	-	1,313	-	1,313

b. Fair value of financial assets and financial liabilities

The fair values of the Group's financial instruments are disclosed in hierarchy levels depending on the nature of the inputs used in determining the fair values as follows:

Level 1: Quoted prices (unadjusted) in active markets for identical assets and liabilities. A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service, or regulatory agency, and those prices present actual and regularly occurring market transactions on an arm's length basis;

Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. The fair value of financial instruments that are not traded in an active market is determined by valuation techniques. These valuation techniques maximise the use of observable market data where it is available and rely as little as possible on entity specific estimates; and

Level 3: Inputs for the asset or liability that are not based on observable market data.

The fair value of cash and cash equivalents, other current interest-bearing deposits, trade receivables, other current assets and trade and other payables approximate their carrying value largely due to the short-term maturities of these instruments.

The following methods and assumptions were used by the Group in estimating its fair value disclosures for financial instruments:

Instruments included in Level 1 comprise listed asset investments classified as available-for-sale and interest-bearing borrowings which are stated at market value at the balance sheet date.

Instruments included in Level 2 include derivatives and interest-bearing borrowings.

Forward currency transactions and over-the-counter fuel derivatives are entered into with various counterparties, principally financial institutions with investment grade ratings. These are measured at the market value of instruments with similar terms and conditions at the balance sheet date using forward pricing models. Counterparty and own credit risk is deemed to be not significant.

At December 31, 2014 Level 2 also included a hedge of the available-for-sale asset which took the form of an equity collar. The valuation of this collar was based on a Black Scholes valuation model using share price spot rate, strike price, stock volatility and the euro interest rate curve.

The fair value of the Group's interest-bearing borrowings including leases is determined by discounting the remaining contractual cash flows at the relevant market interest rates at the balance sheet date.

All resulting fair value estimates are included in Level 2 except for certain investments which are classified as Level 3.

14. FINANCIAL INSTRUMENTS continued

b. Fair value of financial assets and financial liabilities

The carrying amounts and fair values of the Group's financial assets and liabilities at December 31, 2015 are set as follows:


	Fair value				Carrying value
€ million	Level 1	Level 2	Level 3	Total	Total
Financial assets
Available-for-sale financial assets	9	-	65	74	74
Derivatives⁽¹⁾	-	260	-	260	260

Financial liabilities
Interest-bearing borrowings	2,102	7,248	-	9,350	8,630
Derivatives⁽²⁾	-	1,610	-	1,610	1,610

⁽¹⁾Current portion of derivative financial assets is €198 million.
⁽²⁾Current portion of derivative financial liabilities is €1,328 million.

December 31, 2014:
	Fair value				Carrying value
€ million	Level 1	Level 2	Level 3	Total	Total
Financial assets
Available-for-sale financial assets	19	-	65	84	84
Derivatives⁽¹⁾	-	258	-	258	258

Financial liabilities
Interest-bearing borrowings	892	6,256	-	7,148	6,617
Derivatives⁽²⁾	-	1,672	-	1,672	1,672

⁽¹⁾Current portion of derivative financial assets is €178 million.
⁽²⁾Current portion of derivative financial liabilities is €1,313 million.

There have been no transfers between levels of fair value hierarchy during the year.

Out of the financial instruments listed in the previous table, only the interest-bearing borrowings are not measured at fair value on a recurring basis.

c.	Level 3 financial assets reconciliation

	The following table summarises key movements in Level 3 financial assets:
	€ million	December 31, 2015	December 31, 2014
	Opening balance for the year	65	22
	Gains recognised in the Income statement⁽¹⁾	-	1
	Gains recognised in Other comprehensive income⁽²⁾	-	48
	Settlements	(5)	(7)
	Exchange movements	5	1
	Closing balance for the year	65	65

	⁽¹⁾Included in Net credit relating to available-for-sale financial assets in the consolidated Income statement.
	⁽²⁾Included in Available-for-sale financial assets - Fair value movements in equity in the consolidated Statement of other comprehensive income.

	The fair value of Level 3 financial assets cannot be measured reliably; as such these assets are stated at historic cost less accumulated impairment losses with the exception of the Group's investment in The Airline Group Limited. This unlisted investment had previously been valued at nil, since the fair value could not be reasonably calculated. During the year to December 31, 2014 other shareholders disposed of a combined holding of 49.9 per cent providing a market reference from which to determine a fair value. The investment remains classified as a Level 3 financial asset due to the valuation criteria applied not being observable, with the resultant fair value uplift in the prior year being non-recurring in nature.

15. Borrowings

	December 31,	December 31,
	2015	2014
Current
Bank and other loans	576	164
Finance leases	556	549
	1,132	713
Non-current
Bank and other loans	2,176	1,069
Finance leases	5,322	4,835
	7,498	5,904

In May 2015, the Group issued bonds totalling €155 million; €70 million 3.5 per cent coupon repayable in 2022, €55 million 3.75 per cent coupon repayable in 2025, €15 million 2.5 per cent coupon repayable in 2018 and €10 million 3.5 per cent coupon repayable in 2022.

On November 12, 2015, the Group launched two tranches of senior unsecured bonds convertible into ordinary shares of IAG. The first tranche is for a principal amount of €500 million, raising net proceeds of €494 million, due in 2020 and holds a coupon rate of 0.25 percent. The second tranche is for a principal amount of €500 million, raising net proceeds of €494 million, due in 2022 and holds a coupon rate of 0.625 per cent. The conversion price for both tranches was set at a premium of 62.5 per cent on the Group's share price on the date of issuance. The Group holds an option to redeem each tranche of the convertible bond at its principal amount, together with accrued interest, no earlier than two years prior to the final maturity date. The bonds contain dividend protection, and a total of 36,208,923 options related to this bond were outstanding from settlement and at December 31, 2015.

16. SHARE BASED PAYMENTS

During the year 5,050,853 conditional shares were awarded, under the Group's Performance Share Plan (PSP) to key senior executives and selected members of the wider management team. No payment is due upon the vesting of the shares. The fair value of equity-settled share options granted is estimated as at the date of the award using the Monte-Carlo model, taking into account the terms and conditions upon which the options were awarded, or based on the share price at the date of grant, dependent on the performance criteria attached. The following are the inputs to the model for the PSP options granted in the year:

Expected share price volatility: 30 per cent

Expected life of options: 2.4 years

Weighted average share price: £5.50

The Group also made awards under the Group's Incentive Award Deferral Plan during the year, under which 1,918,323 conditional shares were awarded.

17. EMPLOYEE BENEFIT OBLIGATIONS

The Group operates two principal funded defined benefit pension schemes in the UK, the Airways Pension Scheme (APS) and the New Airways pension scheme (NAPS), both of which are closed to new members.

	At December 31, 2015
€ million	APS	NAPS	Other	Total

Scheme assets at fair value	9,916	17,997	429	28,342
Present value of scheme liabilities	(8,405)	(18,460)	(805)	(27,670)
Net pension asset/(liability)	1,511	(463)	(376)	672
Effect of the asset ceiling	(561)	-	-	(561)
Other employee benefit obligations	-	-	(12)	(12)
December 31, 2015	950	(463)	(388)	99

Represented by:
Employee benefit asset				957
Employee benefit obligation				(858)
				99

17. EMPLOYEE BENEFIT OBLIGATIONS continued

	At December 31, 2014
€ million	APS	NAPS	Other	Total

Scheme assets at fair value	9,542	16,201	424	26,167
Present value of scheme liabilities	(8,191)	(17,134)	(795)	(26,120)
Net pension asset/(liability)	1,351	(933)	(371)	(47)
Effect of the asset ceiling	(502)	-	-	(502)
Other employee benefit obligations	-	-	(14)	(14)
December 31, 2014	849	(933)	(385)	(469)

Represented by:
Employee benefit asset				855
Employee benefit obligation				(1,324)
				(469)

The accounting valuation was performed after updating key assumptions at December 31, 2015 as follows:

	APS		NAPS
Per cent per annum	December 31, 2015	December 31, 2014	December 31, 2015	December 31, 2014

Inflation (CPI)	1.85	1.85	2.00	1.95
Inflation (RPI)	2.85	2.85	3.00	2.95
Salary increases (as RPI)	2.85	2.85	3.00	2.95
Discount rate	3.60	3.45	3.85	3.80

Pension contributions for APS and NAPS were determined by actuarial valuation made as at March 31, 2012 using assumptions and methodologies agreed with the Trustees of each scheme.

18. PROVISIONS FOR LIABILITIES AND CHARGES

€ million	Restoration and handback provisions	Restructuring	Employee leaving indemnities and other employee related provisions	Legal claims provisions	Other provisions	Total
Net book value at January 1, 2015	771	895	552	135	118	2,471
Provisions recorded during the year	286	93	25	147	56	607
Acquired through Business combination	73	7	67	8	3	158
Utilised during the year	(182)	(237)	(24)	(36)	(77)	(556)
Release of unused amounts and other movements	(30)	(22)	(51)	(19)	(23)	(145)
Unwinding of discount	4	5	10	1	1	21
Exchange differences	91	3	-	(1)	5	98
Net book value December 31, 2015	1,013	744	579	235	83	2,654
Analysis:
Current	174	198	69	118	46	605
Non-current	839	546	510	117	37	2,049

19. CONTINGENT LIABILITIES

The Group has certain contingent liabilities and guarantees, which at December 31, 2015 amounted to €172 million (December 31, 2014: €138 million). No material losses are likely to arise from such contingent liabilities and guarantees. The Group also had the following claims:

Cargo

The Group is party to a number of legal proceedings in the English courts relating to a decision by the European Commission in 2010 which fined British Airways and ten other airline groups for participating in a cartel in respect of air cargo prices. The decision was partially annulled as against British Airways following an appeal to the general court of the European Union and British Airways was advised that the fine would be refunded in full. It is not yet clear what the European Commission's next steps will be. The original decision has led to a large number of claimants seeking, in proceedings brought in the English courts, to recover damages from British Airways which they claim arise from the alleged cartel activity. It is not possible at this stage to predict the outcome of the proceedings, which British Airways will vigorously defend. British Airways has joined the other airlines alleged to have participated in cartel activity to these proceedings to contribute to such damages, if any awarded.

The Group is also party to similar litigation in a number of other jurisdictions including Germany, the Netherlands and Canada together with a number of other airlines. At present, the outcome of the proceedings is unknown. In each case, the precise effect, if any, of the alleged cartelising activity on the claimants will need to be assessed.

We are currently unable to determine whether the Group has an existing obligation as a result of the past event.

Other

A number of other lawsuits and regulatory proceedings are pending, the outcome of which in the aggregate is not expected to have a material effect on the Group's financial position or results of operations.

20. RELATED PARTY TRANSACTIONS

The Group had the following transactions in the ordinary course of business with related parties.

Sales and purchases of goods and services:
	Year to December 31.
€ million	2015	2014
Sales of goods and services
Sales to associates	8	16
Sales to significant shareholders	29	-

Purchases of goods and services
Purchases from associates	57	59
Purchases from significant shareholders	61	-

Year end balances arising from sales and purchases of goods and services:

€ million	December 31, 2015	December 31, 2014
Receivables from related parties
Amounts owed by associates	3	6
Amounts owed by significant shareholders	1	-

Payables to related parties
Amounts owed to associates	3	6
Amounts owed to significant shareholders	4	-

For the year to December 31, 2015 the Group has not made any provision for doubtful debts arising relating to amounts owed by related parties (2014: nil).

20. RELATED PARTY TRANSACTIONS continued

Board of Directors and Management Committee remuneration

Compensation received by the Group's key management personnel is as follows:

	Year to December 31
€ million	2015	2014
Base salary, fees and benefits
Board of Directors' remuneration	15	13
Management Committee remuneration	22	18

At December 31, 2015 the Board of Directors includes remuneration for two Executive Directors (December 31, 2014: two Executive Directors). The Management Committee includes remuneration for nine members (December 31, 2014: eight members).

The Company provides life insurance for all Executive Directors and the Management Committee. For the year to December 31, 2015 the Company's obligation was €72,000 (2014: €48,000).

At December 31, 2015 the transfer value of accrued pensions covered under defined benefit pension obligation schemes, relating to the Management Committee totalled €9 million (2014: €7 million).

No loans or credit transactions were outstanding with Directors or officers of the Group at December 31, 2015 (2014: nil).

STATEMENT OF DIRECTORS' RESPONSIBILITIES

LIABILITY STATEMENT OF COMPANY DIRECTORS FOR THE PURPOSES ENVISAGED UNDER ARTICLE 11.1.b OF SPANISH ROYAL DECREE 1362/2007 OF 19 OCTOBER (REAL DECRETO 1362/2007).

At a meeting held on February 25, 2016, the Directors of International Consolidated Airlines Group, S.A. confirmed that to the best of their knowledge the Condensed Consolidated Financial Statements for the year to December 31, 2015 were prepared in accordance with IAS 34 as adopted by the European Union, offer a true and fair view of the assets, liabilities, financial situation, cash flows and the results of International Consolidated Airlines Group, S.A. and of the companies that fall within the consolidated group taken as a whole, and the Condensed Consolidated Management Report includes an accurate analysis of the required information also in accordance with the Financial Conduct Authority's DTR 4.2.7R and DTR 4.2.8R (English regulation) including an indication of important events in the year, a description of the principal risks and uncertainties and a list of material related party transactions.

February 25, 2016


	Antonio Vázquez Romero Chairman		Martin Faulkner Broughton Deputy Chairman

	William Matthew Walsh Chief Executive Officer		César Alierta Izuel

	Patrick Jean Pierre Cescau		Enrique Dupuy de Lôme Chávarri

	Denise Patricia Kingsmill		James Arthur Lawrence

	María Fernanda Mejía Campuzano		Kieran Charles Poynter

	Marjorie Morris Scardino		Alberto Terol Esteban

AIRCRAFT FLEET


	Number in service with Group companies

	On balance sheet fixed assets	Off balance sheet operating leases	Total December 31,	Total December 31.	Changes since December 31,	Future deliveries	Options
	On balance sheet fixed assets	Off balance sheet operating leases	2015	2014	2014	Future deliveries	Options

Airbus A318	2	-	2	2	-	-	-
Airbus A319	34	34	68	61	7	2	-
Airbus A320	66	156	222	172	50	101	128
Airbus A321	26	17	43	36	7	18	-
Airbus A330-200	4	-	4	-	4	12	7
Airbus A330-300	3	9	12	8	4	2	-
Airbus A340-300	7	-	7	7	-	-	-
Airbus A340-600	4	13	17	17	-	-	-
Airbus A350	-	-	-	-	-	43	57
Airbus A380	10	-	10	8	2	2	7
Boeing 737-400	-	-	-	5	(5)	-	-
Boeing 747-400	40	-	40	43	(3)	-	-
Boeing 757-200	1	2	3	3	-	-	-
Boeing 767-300	12	-	12	14	(2)	-	-
Boeing 777-200	41	5	46	46	-	-	-
Boeing 777-300	9	3	12	12	-	-	-
Boeing 787-800	8	-	8	8	-	1	-
Boeing 787-900	5	-	5	-	5	16	18
Boeing 787-1000	-	-	-	-	-	12	-
Embraer E170	6	-	6	6	-	-	-
Embraer E190	9	3	12	11	1	2	15
Group total	287	242	529	459	70	211	232

As well as those aircraft in service the Group also holds 11 aircraft (2014: 20) not in service.
A total of 19 aircraft under operating lease and 26 aircraft on balance sheet were acquired through Business combination in the year to December 31, 2015.

This information is provided by RNS

The company news service from the London Stock Exchange

END

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International Consolidated Airlines Group SA (CDI) (IAG)

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